U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Rel. No. 18444 / November 4, 2003
SEC v. Martin J. Druffner, et al., Civil Action No. 03-12154-RCL (D.Mass.)
Commission Files Fraud Charges Against Former Prudential Brokers in Connection With Market Timing of Mutual Funds
The Securities and Exchange Commission today announced a civil fraud action against five brokers and one branch manager formerly employed by Prudential Securities, Inc., in connection with their market timing trades in numerous mutual funds. The Commission alleges in its complaint that, from at least 2001 through September 2003, former brokers Martin J. Druffner, Justin F. Ficken, Skifter Ajro, John S. Peffer, and Marc J. Bilotti defrauded mutual funds and their shareholders by misrepresenting their identities or the identities of their customers in connection with thousands of market timing trades after the mutual funds had restricted or blocked the defendants or their customers from further trading. According to the Commission's complaint, former branch manager Robert Shannon substantially assisted the brokers in their violations by, among other things, approving their market timing trades. Until September 2003, the defendants worked at a Prudential Securities branch in Boston, Massachusetts.
According to the Commission's complaint, filed in federal district court in Boston, from at least 2001 through September 2003, numerous mutual fund companies blocked the defendants or their brokerage customers from further trading in their funds after the mutual fund companies detected market timing activity by the defendants. The complaint alleges that, to evade these blocks, the defendants concealed their own identities by using multiple broker identification numbers or concealed the identities of their brokerage customers by establishing additional brokerage accounts at Prudential Securities on behalf of the customers.
The Commission's complaint alleges that Druffner, Ficken, Ajro, Peffer, and Bilotti violated Section 17(a) of the Securities Act of 1933 and violated or aided and abetted violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint alleges that Shannon aided and abetted his co-defendants' violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Commission is seeking injunctive relief, disgorgement, penalties, and such equitable relief as the court deems appropriate.
The Commission acknowledges the assistance of the Secretary of the Commonwealth of Massachusetts, the National Association of Securities Dealers, and the New York Stock Exchange in its investigation.
The Commission's investigation is continuing.